What Are the Components of an Appraisal?

A home purchase is the most important financial decision some of us might ever encounter. Whether it's a primary residence, a seasonal vacation home or an investment, the purchase of real property is a detailed transaction that requires multiple people working in concert to see it through.

Practically all the participants are quite familiar. The most familiar face in the exchange is the real estate agent. Then, the lender provides the financial capital necessary to bankroll the deal. And the title company ensures that all details of the sale are completed and that a clear title passes to the buyer from the seller.

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So, who's responsible for making sure the real estate is worth the amount being paid? This is where the appraiser comes in. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Blue Ridge Appraisal Co., L.L.C. will ensure, you as an interested party, are informed.

Inspecting the subject property

To determine an accurate status of the property, it's our duty to first perform a thorough inspection. We must see aspects of the property hands on, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are present and are in the shape a reasonable buyer would expect them to be. To make sure the stated square footage is accurate and describe the layout of the house, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would have an impact on the value of the property.

Following the inspection, we use two or three approaches to determining the value of real property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where we analyze information on local construction costs, labor rates and other factors to derive how much it would cost to build a property comparable to the one being appraised. This estimate usually sets the maximum on what a property would sell for. It's also the least used predictor of value.

Analyzing Comparable Sales

Appraisers get to know the subdivisions in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the real estate in question. Using knowledge of the value of certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we add or subtract from each comparable's sales price so that they more accurately portray the features of subject property.

If, for example, the comparable has a storm shelter and the subject does not, the appraiser may deduct the value of a storm shelter from the sales price of the comparable.
In the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. At Blue Ridge Appraisal Co., L.L.C., we are experts in knowing the worth of real estate features in Staunton and Staunton City County neighborhoods. The sales comparison approach to value is commonly given the most consideration when an appraisal is for a real estate purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - we may use a third approach to value. In this scenario, the amount of income the property yields is factored in with other rents in the area for comparable properties to give an indicator of the current value.

The Bottom Line

Analyzing the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. Note: While the appraised value is probably the most accurate indication of what a house is worth, it probably will not be the final sales price. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is typically employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to sell the property again. At the end of the day, an appraiser from Blue Ridge Appraisal Co., L.L.C. will guarantee you discover the most accurate property value, so you can make wise real estate decisions.

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